The Bank of Japan (BOJ) may continue to raise interest rates higher than market predictions, with the possibility of two more hikes this year, according to t-155, a former BOJ executive.
📌 Could the BOJ raise interest rates to 1.5%?
Hayakawa predicts the final interest rate in this cycle could reach 1.5%, higher than many experts' predictions but in line with the forecast of the International Monetary Fund (IMF).
The BOJ just raised interest rates to 0.5% on January 24, marking the highest level in 17 years. According to Hayakawa, the next rate hike could occur around July, with another possible increase by the end of the year.
📌 Why will the BOJ continue to raise interest rates?
🔹 #BOJ announced a neutral interest rate (neither stimulating nor restraining the economy) ranging from 1% to 2.5%.
🔹 Many experts predict the BOJ's interest rate will reach 1%, but Hayakawa believes this figure will not stop at the lowest level.
🔹 Inflation remains high, with a 12-month CPI increase of 3.6% in December 2023 – the highest level in nearly 2 years.
🔹 Fresh food prices have increased by up to 17.3% over the past 8 years, affecting consumer spending.
📢 "The BOJ will continue to raise interest rates cautiously, step by step, after reaching 1%." – Hayakawa emphasized.
📌 What factors could influence the BOJ's decision?
🔸 Yen exchange rate: If the yen weakens significantly, the BOJ may accelerate its interest rate hike plans.
🔸 U.S. economic policy: The Federal Reserve's pause on interest rate cuts provides flexibility for the BOJ, but the impact of President Donald Trump's policies remains difficult to predict.
🔸 Consumer spending: If inflation drives up the cost of living, leading to a decrease in real income, consumers may tighten spending, slowing the BOJ's interest rate hike process.
📌 The BOJ is facing a difficult problem
Although the BOJ has forecast inflation will remain above 2% until 2027, raising interest rates too quickly could pressure the economy. Hayakawa acknowledges that the BOJ is facing risks of rising inflation, making policy decisions more difficult.
💡 In summary, the BOJ may not stop at an interest rate of 1% as many believe. In 2024, this bank may continue to raise interest rates to 1.5%, depending on economic developments and inflation.
